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There are two major benefits a business broker can provide the business seller. First, they can locate potential buyers while maintaining the seller's confidentiality. And second, they can pre- qualify these potential buyers so the seller saves time by not having to deal with tire kickers or unqualified prospects.

The big negative of dealing with a broker of course is his fee, which averages 10-15% of the sale price. This fee is charged to the seller. There is also a minimum fee so a very small business will pay a flat amount, typically $8-$10,000, instead of the commission. For a business worth $50,000 this minimum fee actually works out to be a higher percentage than the 10-15% industry norm.

These fees are the reason most business owners choose to sell their business themselves and rely on their lawyers, accountants and appraisers for the professional assistance they need.

In some states business brokers must also hold a real estate license. In these states it's common to find real estate agents that do business brokering as a sideline. If you deal with a broker who is also a real estate agent, make sure business brokering is more than just his hobby or part-time business.

If you decide to use a business broker you'll be asked to sign a listing agreement which will detail the broker's fees. If possible, have your agreement with the broker include the following clauses:

Timing of Payments - Have it written into the listing agreement that the broker's fee will be paid at the time you receive the purchase price - not at the time the sale is closed. This way, if you finance a portion of the sale price over a period of years, you pay the broker as you get the money, not all up front.

Length of Agreement - Your listing agreement should be for a limited length of time. If the broker locates the buyer within that time he gets paid. Be careful of lengthy agreements that lock you in with one broker for more than 6 months. If he doesn't produce results, you want to be able to try other avenues.

A 6 month agreement is the longest you should allow. However, because selling a business can be a lengthy process, 3 months is usually too little time for the broker to find the right buyer. Try to settle on something between 3 and 6 months. If after six months, you haven't closed the deal but you think the broker has done a good job, your always free to extend the agreement. But you want to be free to decide on an extension 6 months from now, not today.

Broker's Guarantee - Include a clause stating that if you find the buyer, you don't have to pay the broker's commission. Without this clause, the broker is usually paid no matter who actually locates the buyer.

Before signing any listing agreement it is best to have your attorney review it to make sure your interests are protected.

TheBizSeller.com can help sell your small business fast. We attract
qualified business buyers, pre-screen all prospects and refer those
buyers who meet your standards directly to you. You pay no broker's
commissions and you confidentiality is guaranteed.
TheBizSeller.com